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Cheesecake Factory: Why Piper Jaffray's Downgrade Was Baseless

Keep in mind that the market seems to be forcing all companies to recognize debt and reduce leverage. Retail doesn't have much in SPE's but they do have long term leases which aren't reflected in debt. When you run the numbers for CAKE and convert the leases, you end up with leverage of around eight. In addition CAKE is continuing buybacks with debt. It seems management might want to stockpile some cash. The 80M referred to earlier is about half of their accounts payable and like a typical restaurant they usually don't normally need as much working capital. However this is a different environment than previous downturns.